WEBVTT - Surveillance: The Shift To E-Commerce 0:00:09.880 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Daily 0:00:13.960 --> 0:00:17.560 we bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.480 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:27.760 Bloomberg dot Com, and of course on the Bloomberg. Let's 0:00:27.800 --> 0:00:30.280 see what our next guest, our first guest uh this 0:00:30.360 --> 0:00:32.800 morning has to say. Stein Jakobsen is with us. He's 0:00:32.840 --> 0:00:37.720 chief investment officer at Saxo Bank, joining us on this Wednesday. Steen. 0:00:37.840 --> 0:00:40.199 Nice to have you here with Matt and myself. You know, 0:00:40.280 --> 0:00:42.919 it has been a year of extremes, even though it's 0:00:42.920 --> 0:00:46.400 a little bit quiet on this Wednesday. But whether it's Bitcoin, 0:00:46.440 --> 0:00:48.880 whether it's I p o s, whether it's SPACs, whether 0:00:48.920 --> 0:00:50.760 it's some of those big fang stocks here in the 0:00:50.880 --> 0:00:54.440 United States, and we've seen big global moves, how does 0:00:54.560 --> 0:01:00.640 that carry over or maybe set the stage for it's 0:01:00.760 --> 0:01:04.240 more of the same. And I think you're leading into 0:01:04.240 --> 0:01:07.240 your question. The conversation between you and Matt is clearly 0:01:07.640 --> 0:01:10.480 indicating that we all right now waiting for January four 0:01:10.680 --> 0:01:13.600 and the runoff in Georgia to set the stage for 0:01:13.800 --> 0:01:15.880 what is the next level? And I think to some 0:01:15.959 --> 0:01:18.640 extent mix. McConnell is playing that card. He wants to 0:01:18.760 --> 0:01:22.320 be seen to be fiscally prudent into that sort of 0:01:22.720 --> 0:01:26.240 leadoff uh and and designing what's going to be the 0:01:26.240 --> 0:01:29.200 next two years before the midterm election. So I think 0:01:29.200 --> 0:01:31.959 there's a very big political game going on in Washington 0:01:32.000 --> 0:01:34.560 the terms of the US market, but in terms of 0:01:34.600 --> 0:01:37.600 policy response, we know exactly what's going to happen in 0:01:37.680 --> 0:01:41.320 twenty one. Any slowdown in economy, any increase in the 0:01:41.440 --> 0:01:45.360 virus cases will be met by easier monetary policy by 0:01:45.440 --> 0:01:49.240 fit and global center banks, and the fiscal person will 0:01:49.240 --> 0:01:53.480 sit very very loose. On the politician, whatever color brand 0:01:54.000 --> 0:01:57.360 ideas they come from. It's all about supporting a market 0:01:57.680 --> 0:02:02.720 with no looking at the actual detail and non intended consequences. 0:02:02.760 --> 0:02:05.480 So you know, most simulus but but I think for me, 0:02:06.800 --> 0:02:08.680 but deep down, the only quasition that really matters to 0:02:08.720 --> 0:02:11.120 me is where we end with ten year US interest 0:02:11.240 --> 0:02:14.040 rate in one If it's hundred and fifty two hundred, 0:02:14.280 --> 0:02:17.400 I think the rate sensitivity of the stock market will 0:02:17.440 --> 0:02:21.639 come to you really think, do you really think we'll 0:02:21.639 --> 0:02:26.440 get to that rate on the tenure? Absolutely? Absolutely. I 0:02:26.440 --> 0:02:28.320 think two things are going on I think we have 0:02:28.440 --> 0:02:32.639 been so dependent on the digital online transformation that the 0:02:32.639 --> 0:02:36.880 physical world, the physical infrastructure no longer can actually follow 0:02:37.360 --> 0:02:40.160 the success of that. So in other words, we've been 0:02:40.160 --> 0:02:44.920 too successful in digitization and online sells going on to 0:02:45.040 --> 0:02:47.320 the extent that ups and FedEx so they cannot get 0:02:47.400 --> 0:02:50.160 vans to do the last mild delivery. We see shipping 0:02:50.240 --> 0:02:53.920 rates across the group reaching all time highest together with 0:02:53.960 --> 0:02:57.000 the stock market, not based on loose monetary policy, but 0:02:57.120 --> 0:03:00.520 simply the fact that the infrastructure no longer is able 0:03:00.560 --> 0:03:02.920 to deal with the success of this online story. That 0:03:03.080 --> 0:03:05.400 is inflation in itself. On top of that, we have 0:03:05.480 --> 0:03:08.040 had an un investment into the mining sector for years 0:03:08.160 --> 0:03:12.080 upon years, and the same mining sector sixth centrally into 0:03:12.120 --> 0:03:15.960 this theme of green transformation, the green Cabinet that Biden 0:03:16.000 --> 0:03:19.520 talks about that he's appointed, the EU Deal which is green, 0:03:19.600 --> 0:03:23.280 and of course China sixty. So absolutely I think inflation 0:03:23.400 --> 0:03:26.400 is coming back in in one and and for the record, 0:03:26.440 --> 0:03:28.560 I think growth would be much higher than the very 0:03:28.600 --> 0:03:30.720 negative outlook that we have a simple link right now, 0:03:32.520 --> 0:03:36.080 So one and a half percent to two percent um. 0:03:36.120 --> 0:03:39.360 Does that mean we see more movement from the FED 0:03:39.520 --> 0:03:41.320 at the year end, seeing if we see the ten 0:03:41.400 --> 0:03:45.360 year rate get to that level. Of course, the position 0:03:45.400 --> 0:03:47.360 of the FED right now is dovish, and with the 0:03:47.440 --> 0:03:50.800 changes of the voting members coming into the Federal Reserve 0:03:50.880 --> 0:03:53.080 Board for the new year, they're getting even more dovish. 0:03:53.320 --> 0:03:55.600 So they come into the year with a very dovish 0:03:55.600 --> 0:03:58.360 stands wanting to do more on the downside. So first 0:03:58.360 --> 0:04:01.080 they need to move to manutral, which I think it's 0:04:01.080 --> 0:04:03.760 really what's one is about for FET, but they could 0:04:03.880 --> 0:04:07.360 if they've seen a huge price on on on inflation. 0:04:07.400 --> 0:04:10.000 They will be caught short. Don't forget the FED does 0:04:10.080 --> 0:04:14.680 not expect themselves in the dot plot to move before four. 0:04:15.280 --> 0:04:18.320 That is absolutely unrealistic in my mind. And and for 0:04:18.360 --> 0:04:20.760 the regged again, I think FED is one of the 0:04:20.800 --> 0:04:24.840 worst predictors of growth in the US, if anybody of anybody. 0:04:26.600 --> 0:04:30.279 So I'm just wondering because exactly they said they're gonna 0:04:30.279 --> 0:04:34.480 hold pat until and if we do see the kind 0:04:34.520 --> 0:04:37.159 of inflation that you're talking about, if we do see 0:04:37.560 --> 0:04:42.440 rates creep up, if you know, assets continue, if markets 0:04:42.480 --> 0:04:47.080 continue to act as irrationally exuberant as the Airbnb I 0:04:47.320 --> 0:04:51.760 p O proved, the FED has to do something maybe 0:04:51.760 --> 0:04:56.240 beyond moving to neutral, don't they Yeah, no, no, that 0:04:56.400 --> 0:04:58.560 is my take, mat But I'm just making the case 0:04:58.600 --> 0:05:00.840 here that we first need to move to MOODU and 0:05:00.880 --> 0:05:03.279 then we move into a hiking cycle. And when we 0:05:03.320 --> 0:05:05.400 get to the hiking cycle, I think we'll have a 0:05:05.400 --> 0:05:08.960 detrimental negative impact on the stock market because the fact 0:05:09.040 --> 0:05:11.640 is that if you look at the NaSTA two actually 0:05:11.800 --> 0:05:15.040 actually in the hundred index, they have had no earnings 0:05:15.080 --> 0:05:17.560 increases over the last two years. So all of the 0:05:17.600 --> 0:05:21.719 increase in valuation that receive in our technology mainly portfolio 0:05:22.080 --> 0:05:23.880 is from the fact that we have an interest rate 0:05:23.920 --> 0:05:27.719 sensitivity supporting the stocks. So in other words, the worst 0:05:27.800 --> 0:05:31.120 economy gets, the more support you get from the interrates 0:05:31.120 --> 0:05:35.200 sensitivity part and inverse, when we go to a high inflational, 0:05:35.279 --> 0:05:39.440 higher steering rate, higher capacity utilization, yes, clearly the rate 0:05:39.480 --> 0:05:43.000 sensitivity will be very negative for the technology in particular. 0:05:45.279 --> 0:05:47.240 All right, Stevean, thanks so much for joining us. Really 0:05:47.240 --> 0:05:51.160 appreciate your time. Stean Jacobson, Saxo Bank Chief Investment Officer, 0:05:51.640 --> 0:05:54.520 I wish you a happy New Year, happy socially distanced 0:05:54.560 --> 0:06:06.240 and masked New Year's Eve. We got to talk about 0:06:06.240 --> 0:06:09.400 retail Matt because of course we're wrapping up the holiday 0:06:09.440 --> 0:06:11.719 season and it was a holiday season unlike any others. 0:06:11.720 --> 0:06:14.000 Want to get right to our guest because Jerry Storch 0:06:14.120 --> 0:06:17.120 is with us a Storch Advisors UH. He's a management 0:06:17.320 --> 0:06:20.640 UH and and advisory to UM a lot of other 0:06:20.680 --> 0:06:22.640 retail companies that are out there. CEO and founder of 0:06:22.640 --> 0:06:25.200 his own firm, former chairman ce of Toys Arrest, former 0:06:25.240 --> 0:06:28.320 CEO of Hudson's Bay Company, former vice chairman of Targets, 0:06:28.360 --> 0:06:31.880 so understands the retail industry so well. Jerry, Nice to 0:06:31.920 --> 0:06:35.320 have you with Matt and myself on Bloomberg Surveillance. You know, 0:06:35.680 --> 0:06:38.440 we've had the conversations about you know, a lot of 0:06:38.440 --> 0:06:41.599 the trends that we've been seeing in retail got sped 0:06:41.720 --> 0:06:45.360 up this year because of the pandemic. What trends really 0:06:45.400 --> 0:06:47.040 stand out for you that you think are going to 0:06:47.120 --> 0:06:50.960 be significant drivers of retail going forward? And good morning 0:06:51.000 --> 0:06:55.120 by good morning, obviously you have to start with the 0:06:55.120 --> 0:06:57.640 shift to e commerce. I mean, this is just massive. 0:06:58.000 --> 0:07:01.200 It was happening before, but there's no doubt got tremendously accelerated. 0:07:01.200 --> 0:07:03.680 I think what happened now is people who weren't as 0:07:03.680 --> 0:07:06.359 prone to use e commerce. They had to because it 0:07:06.400 --> 0:07:08.320 was the safe way to buy things, and they found 0:07:08.320 --> 0:07:10.960 out not so bad. So a lot of that's gonna stick, 0:07:11.080 --> 0:07:13.840 so you will you have in vaccine and acceleration towards 0:07:13.840 --> 0:07:17.720 e commerce. Another big trend is to shift away from apparel, 0:07:17.880 --> 0:07:22.240 from clothing into hard lines, electronics, other types of physical goods, 0:07:22.600 --> 0:07:25.920 and so apparel has been in long term decline and 0:07:26.000 --> 0:07:28.720 if you look at over a ten year cycle, clothing 0:07:28.800 --> 0:07:30.680 is down not so much. People are you know, are 0:07:30.720 --> 0:07:32.520 wearing you know, going out without any clothes on, or 0:07:32.560 --> 0:07:34.960 wearing less clothes, but there's been a big casualization of 0:07:34.960 --> 0:07:37.840 the workforce, so you buy less expensive clothes, and then 0:07:37.880 --> 0:07:39.920 even for the same clothes, the average price point is 0:07:40.000 --> 0:07:42.800 declined with the advent of fast fashion and all the 0:07:42.840 --> 0:07:45.360 discounters taking huge markets. I mean, the basest clothing sellers 0:07:45.360 --> 0:07:48.240 in the US right now are Walmart targeting Amazon. So 0:07:48.280 --> 0:07:50.360 the average price points to claim. So what are people 0:07:50.360 --> 0:07:53.240 doing with that money. They're buying hardlines, they're buying electronics, 0:07:53.360 --> 0:07:55.840 and now in the pandemic for the home, and you know, I, 0:07:55.960 --> 0:07:57.600 for one, I don't think I'm alone. You know, I 0:07:57.600 --> 0:07:59.720 started learning more about how to bake. And now that 0:07:59.800 --> 0:08:02.040 I of the pathos and the chemistry of banking, I'm 0:08:02.040 --> 0:08:04.440 gonna keep banking. So there's gonna be a lot of shift, 0:08:04.680 --> 0:08:08.160 even more ecceler away from apparel and towards home. You 0:08:08.200 --> 0:08:10.680 have the shift away from their apartment starts and towards 0:08:10.680 --> 0:08:14.440 the discount stores. That's continuing, only accelerated by the pandemic. 0:08:16.320 --> 0:08:19.880 It's funny I as well, Jerry, have really taken up 0:08:19.920 --> 0:08:23.040 cooking over um the past few weeks and months only 0:08:23.120 --> 0:08:28.320 because of this lockdown. I will point out one retailer 0:08:28.400 --> 0:08:31.680 that one clothing retailer has done quite well, at least partially. 0:08:31.680 --> 0:08:34.760 Clothing is l brands more than doubled this year. But 0:08:34.800 --> 0:08:39.000 that's because, of course they don't sell office closed right, Um, 0:08:39.120 --> 0:08:42.360 they sell maybe the less appropriate things you would wear 0:08:42.400 --> 0:08:44.360 the office for Victoria's secret or the things that you 0:08:44.360 --> 0:08:47.480 would use at home, like bath and body works. We 0:08:47.520 --> 0:08:49.640 had a guest on a little bit earlier, seen Jakopson, 0:08:49.679 --> 0:08:53.520 who said, one of the big problems for retailers right now, Jerry, 0:08:53.600 --> 0:08:57.520 is that, um, the logistics is so expensive shipping stuff. 0:08:57.720 --> 0:09:00.280 You can't find a truck out there, you know, tough 0:09:00.320 --> 0:09:02.600 to get things on boats at a decent price. Do 0:09:02.679 --> 0:09:05.040 you see that kind of inflation for companies that need 0:09:05.080 --> 0:09:07.840 to shift their goods to people who now order everything 0:09:07.840 --> 0:09:11.440 on the internet. Well, I think there's the real topic 0:09:11.559 --> 0:09:14.480 is that is that there's a negative arbitrage in the 0:09:14.559 --> 0:09:18.840 marginal profitability of an item that you sell and delivered 0:09:18.840 --> 0:09:22.080 to someone's home on the internet versus when the customer 0:09:22.160 --> 0:09:25.319 comes walking into the store and does all the transportation 0:09:25.360 --> 0:09:27.920 themselves and by it just picks it off the shelf 0:09:27.960 --> 0:09:30.560 and takes it home. And so for a lot of retailers, 0:09:30.640 --> 0:09:32.480 a lot of companies, this is the most frequent, by 0:09:32.480 --> 0:09:35.160 the way, assignment that I get its storage advisors help 0:09:35.160 --> 0:09:37.520 people figure this out. For a lot of retailers, they 0:09:37.559 --> 0:09:39.600 have to sell twice as much on the inner twice 0:09:40.120 --> 0:09:43.319 do you get the same marginal economics the same marginal 0:09:43.320 --> 0:09:46.320 profitability is what they sell in store, because you already 0:09:46.360 --> 0:09:48.400 have the stores, all the people already there, and the 0:09:48.440 --> 0:09:51.400 customer does that last leg themselves. So that's really the 0:09:51.440 --> 0:09:54.199 biggest issue. And by the way, during the pandemic, FedEx 0:09:54.200 --> 0:09:57.480 and ups, if you know, they've had capacity constraints and 0:09:57.520 --> 0:09:59.640 they said okay, let the market clear it and they 0:09:59.720 --> 0:10:01.880 raise their prices. They put in big search charges, so 0:10:02.080 --> 0:10:05.200 it's costs more than it normally did. Eventually that will equalize, 0:10:05.240 --> 0:10:07.560 that will come down. So I think over time, as 0:10:07.600 --> 0:10:09.680 the system gets built out, is E commerces a higher 0:10:09.720 --> 0:10:13.640 percentage of total sales, that penalty goes down, and that 0:10:13.720 --> 0:10:16.280 freight penalty goes down over a period of years, not instantly, 0:10:16.320 --> 0:10:18.439 but but and for some companies, what I like to 0:10:18.480 --> 0:10:21.200 look at as the margin pool. You know, how many 0:10:21.240 --> 0:10:24.079 dollars a margin or in that shipment you're sending someone, 0:10:24.240 --> 0:10:26.000 you know, a pack of toilet paper. There's not a 0:10:26.000 --> 0:10:28.280 lot of margin, but it's but it's bulky, you know, 0:10:28.520 --> 0:10:30.640 is it's related to the cube more than anything else. 0:10:30.920 --> 0:10:33.240 But if it's a you know, a diamond ring, no problem, 0:10:33.400 --> 0:10:35.560 you know, because you could a thousand dollar ring, you 0:10:35.559 --> 0:10:38.880 could have fifty five margin. The thing the transportation cost 0:10:38.960 --> 0:10:40.960 doesn't matter, but it does when it's only a dollar 0:10:41.040 --> 0:10:42.160 or two. And that's why you have to look at 0:10:42.160 --> 0:10:45.560 each retailer separately and say who has best marginal economics? 0:10:45.559 --> 0:10:48.320 So there's the best you know, margin pool to ship 0:10:48.360 --> 0:10:50.160 that product to the home, so that the shipping becomes 0:10:50.200 --> 0:10:52.600 less and for a luxury retailer. You know, it's not 0:10:52.679 --> 0:10:54.720 very important because the customers are spending a lot of 0:10:54.720 --> 0:10:57.120 money with a big margin rate. The shipping cost is 0:10:57.160 --> 0:10:59.800 trivial compared to the overall margin pool. Yeah, and listen. 0:11:00.000 --> 0:11:01.400 Want to ask you, though, Jerry, if you go up 0:11:01.400 --> 0:11:03.319 and down the avenues here in New York, even across 0:11:03.320 --> 0:11:07.640 from Bloomberg headquarters, there's multiple retail stores that were here 0:11:07.679 --> 0:11:11.720 before the pandemic and they're not anymore. Who takes advantage 0:11:11.800 --> 0:11:14.559 of that retail property on the other side of the pandemic. 0:11:14.559 --> 0:11:16.319 Who are the retailers that you think are going to 0:11:16.400 --> 0:11:19.199 be able to snap up some of those smaller, smaller locations. 0:11:20.000 --> 0:11:23.120 Are are that really need more locations at this point 0:11:23.200 --> 0:11:25.360 that there will be demand for their goods? We have 0:11:25.400 --> 0:11:28.400 to separate New York real estate from all the rest. 0:11:28.520 --> 0:11:30.439 You know, it's very different in Manhattan than it is 0:11:30.960 --> 0:11:33.520 elsewhere in the world. For most of the United States, 0:11:33.559 --> 0:11:36.719 the winners are clear. It's target Walmart Costco. You know, 0:11:36.760 --> 0:11:39.480 it's big discount change. They have done fantastic, not only 0:11:39.720 --> 0:11:41.040 by the way on the Internet, but a lot of 0:11:41.080 --> 0:11:42.959 times their store numbers have been up when you look 0:11:42.960 --> 0:11:45.240 at how they're because people have had fewer places to 0:11:45.320 --> 0:11:47.080 go to, and they've been consoliding that it was making 0:11:47.120 --> 0:11:49.760 big average ticket purchases when they go to those places. 0:11:49.800 --> 0:11:51.960 So those are those are are big winners. Other big 0:11:52.000 --> 0:11:53.840 winners of the home people like home Depot and Lows. 0:11:53.840 --> 0:11:56.360 These numbers have been phenomenal that they're reporting, and I 0:11:56.360 --> 0:11:58.600 don't think that's going to you know, soften, but it's 0:11:58.600 --> 0:12:00.760 not going to change in terms of the middle long 0:12:00.880 --> 0:12:03.440 term trend as we were discussing other warreas, people like 0:12:03.480 --> 0:12:05.720 the dollar stores, I mean dollar in general, it's just 0:12:05.960 --> 0:12:08.040 hitting it out of the park day day, week after 0:12:08.080 --> 0:12:10.280 a week. So were the so his Family Dollar. Now 0:12:10.440 --> 0:12:12.000 that you know that, they've got all the trends in 0:12:12.040 --> 0:12:13.920 their direction, so I think a lot of it's gonna 0:12:13.960 --> 0:12:16.440 go to people like people like this. The Mama Pops 0:12:16.480 --> 0:12:18.320 are getting crushed. I mean they're absolutely get in crush. 0:12:18.360 --> 0:12:20.360 I mean, if you only have a single store, you 0:12:20.440 --> 0:12:23.040 can't really you know, you have a limited line of offering. 0:12:23.120 --> 0:12:26.439 You've been killed by the pandemic, maybe you weren't declared essential. 0:12:26.720 --> 0:12:30.480 Beyond that, you have capacity restraints, constraints. Meanwhile, you can't 0:12:30.480 --> 0:12:33.440 even afford to set up a really great internet site. 0:12:33.520 --> 0:12:35.079 Needed it could you wouldn't have to get the traffic 0:12:35.120 --> 0:12:37.719 to a because of fortune to pay Google Facebook for 0:12:37.760 --> 0:12:39.600 the ads. Thin get the traffic. I gotta jump in. 0:12:39.640 --> 0:12:41.560 I wish we had like an hour just to talk 0:12:41.600 --> 0:12:43.280 with you. We're gonna have to get you back because 0:12:43.480 --> 0:12:45.520 I love talking about retail and there's so much going on. 0:12:45.600 --> 0:12:49.439 Jerry's Stort of Storage Advisor's former CEO of Toys r 0:12:49.480 --> 0:13:03.000 Us and Hudson's Bay. Let's bring in a guest who 0:13:03.000 --> 0:13:05.240 has a lot of experience with this kind of thing, 0:13:05.280 --> 0:13:07.920 even though it's been a while since a value rotation. 0:13:08.000 --> 0:13:10.959 Jim Paulson from luth Old Weeden Capital Management. He's the 0:13:11.000 --> 0:13:14.839 chief investment officer there. I'm not saying you're old, but 0:13:14.920 --> 0:13:18.080 let's say you're our age. Jim. You fit in the 0:13:18.160 --> 0:13:22.920 same demographic with me and Carol. You were there the 0:13:23.000 --> 0:13:25.800 last time value stocks for hip. He's seen a lot 0:13:25.800 --> 0:13:29.640 of cycles, is what you're saying. Absolutely, So are we 0:13:29.679 --> 0:13:32.440 going to see it again? Is is it possible that 0:13:32.720 --> 0:13:35.720 we rotate out of growth and into value now that 0:13:35.840 --> 0:13:38.520 actually some of the stocks I think of his growth 0:13:38.600 --> 0:13:44.480 docks could now be value stocks. You don't um I've 0:13:44.559 --> 0:13:48.280 sort of I've sort of moved away from thinking a 0:13:48.280 --> 0:13:52.520 lot about value or growth. UM. I thought more about 0:13:52.559 --> 0:13:55.839 sectors because I think ever since the dot com boom, 0:13:55.920 --> 0:13:59.240 we have really screwed up kind of the value growth 0:13:59.440 --> 0:14:03.440 trade off. There. There's a lot of times all own 0:14:03.600 --> 0:14:06.160 parts of value and parts of growth, and I think 0:14:06.200 --> 0:14:08.200 that's a better way to approach it. I think a 0:14:08.240 --> 0:14:12.040 lot of the value space is already starting to outperform 0:14:12.080 --> 0:14:17.520 and will uh continue to outperform UM. But I wouldn't 0:14:17.559 --> 0:14:21.600 necessarily just buy a value et F, you know, I'd 0:14:21.600 --> 0:14:24.360 still look at sectors. I think there's some sectors in there, 0:14:24.640 --> 0:14:28.160 the traditional value sectors I really like. I really like 0:14:28.320 --> 0:14:33.880 the global synchronized recovery play, which to me really hits 0:14:33.880 --> 0:14:39.840 a lot of industrials and materials UH sectors, traditional more 0:14:39.920 --> 0:14:43.680 value plays. I like the idea that we're gonna have 0:14:43.880 --> 0:14:48.120 probably in one the fastest world growth rate in a 0:14:48.200 --> 0:14:52.520 long time, and particularly United States, maybe the fastest world. 0:14:52.840 --> 0:14:56.440 Fastest growth here UM, I think it's gonna be around 0:14:56.520 --> 0:15:02.000 six percent, so maybe uh since and to me, UM 0:15:02.080 --> 0:15:05.400 that says interest rates fields go up this year, which 0:15:05.400 --> 0:15:08.120 would favor I take the financials in the big way. 0:15:08.280 --> 0:15:12.360 Traditional value play um so Jim, wait, wait, Jim, let 0:15:12.360 --> 0:15:15.000 me jump in, Let me jump in, because um Stean Jakobson, 0:15:15.280 --> 0:15:18.040 who we had on earlier UM talked about a tenure 0:15:18.080 --> 0:15:20.600 maybe hitting one and a half two per cent, And 0:15:20.640 --> 0:15:23.160 I do wonder if, indeed we start to see rates 0:15:23.200 --> 0:15:25.800 going higher, if we see some signs of inflation, how 0:15:25.800 --> 0:15:28.640 does that play out essentially though, when it comes to 0:15:28.680 --> 0:15:32.040 FED policy, and what does that then translate into the 0:15:32.080 --> 0:15:34.840 financial markets, the equity markets. Do we see then ultimately 0:15:34.880 --> 0:15:37.120 a pullback as a result, even though we're seeing strong 0:15:37.160 --> 0:15:41.520 growth in the economy. Well, I I think that one 0:15:41.560 --> 0:15:43.760 of the things that's really interesting. There's a lot of 0:15:43.840 --> 0:15:47.400 unique aspects carroll about where we are today, but one 0:15:47.440 --> 0:15:51.240 of them is that this record setting low yield environment 0:15:51.320 --> 0:15:55.440 and really inflation environment simultaneously. So when we as we 0:15:55.560 --> 0:15:59.760 lift off into this new recovery, we're not lifting off 0:15:59.800 --> 0:16:02.200 for three or four percent yields and three or four 0:16:02.680 --> 0:16:07.760 three percent inflation. We're lifting for record unprecedented levels. And 0:16:08.000 --> 0:16:10.920 I think they could go up a fairer ways before 0:16:11.000 --> 0:16:14.920 they really become problematic for the economy and for the 0:16:14.960 --> 0:16:18.840 stock market. UM. I look back, for example, the nineteen 0:16:18.920 --> 0:16:22.920 hundred just recently, Carroll and took all the months when 0:16:23.200 --> 0:16:27.840 bond yields have been below three and looked at what's 0:16:27.880 --> 0:16:30.440 the impact on the stock market when they go up 0:16:31.120 --> 0:16:34.320 versus what they generally did if they're about three percent. 0:16:34.720 --> 0:16:37.360 When they've been about three percent, which is about seventy 0:16:37.960 --> 0:16:41.480 at a time since nineteen the stock market actually goes 0:16:41.560 --> 0:16:45.280 down on average when on UH when rates go up, 0:16:45.680 --> 0:16:49.480 But when you're below three percent, higher rates actually lead 0:16:49.560 --> 0:16:53.080 to a better stock market by a wide margin. In fact, 0:16:53.480 --> 0:16:55.800 all the months that we've been had a tenure yield 0:16:55.840 --> 0:16:59.440 below three stock market when when they went up the 0:16:59.440 --> 0:17:04.600 stock mark and analyze almost games and I think the differences. 0:17:04.640 --> 0:17:07.399 If we take the bond yield from below one to two, 0:17:08.080 --> 0:17:11.800 it will actually boost confidence in the future. It might 0:17:11.880 --> 0:17:16.200 stoke animal spirits in the economy, moving us away from 0:17:16.359 --> 0:17:18.760 years of negative yields in the United States and the like. 0:17:19.000 --> 0:17:21.639 So I think I think that will actually be a 0:17:21.720 --> 0:17:24.640 positive relian negative for a while. Got it, Jim, Thank 0:17:24.680 --> 0:17:28.520 you so much, Jim Paulson, Luther Oldweden Capital of course. Uh. 0:17:28.560 --> 0:17:41.560 The ce IO over there. Dr Mercedes Carnathon is Northwestern 0:17:41.640 --> 0:17:45.280 University professor and preventive Medicine, also Vice Chair of the 0:17:45.280 --> 0:17:48.800 Department of Preventive Medicine, joining us here, Um, nice to 0:17:48.840 --> 0:17:52.320 have you here with us, Mercedes. Let's talk about what's 0:17:52.359 --> 0:17:54.639 going on here. And you know, President like Joe Biden 0:17:54.680 --> 0:17:57.959 coming out, he's worried about the distribution and logistics. You 0:17:58.200 --> 0:18:02.440 are hearing about it, seeing about at firsthand, there's hiccups. 0:18:02.520 --> 0:18:04.280 Are you concerned that it's going to take a lot 0:18:04.280 --> 0:18:08.960 longer than everybody anticipated? You know, certainly the original projections 0:18:09.000 --> 0:18:13.280 of twenty million doses being in the arms of people 0:18:13.800 --> 0:18:17.520 by the end of was ambitious, and you know, it's 0:18:17.560 --> 0:18:20.440 it's fine to set ambitious and lofty goals. I think 0:18:20.480 --> 0:18:22.560 what we found out in the process was that it 0:18:22.600 --> 0:18:25.399 was a little more complicated than we thought, and so 0:18:25.480 --> 0:18:28.760 that's not unexpected to see that hiccup. But I am 0:18:28.800 --> 0:18:32.399 concerned about these projections that it would take ten years 0:18:32.480 --> 0:18:35.359 at the current rate to vaccinate this many people. But 0:18:35.440 --> 0:18:37.199 you know, of course, when you start something up, it 0:18:37.200 --> 0:18:39.920 tends to be a little slower. I feel very hopeful 0:18:40.000 --> 0:18:42.440 that the pace of this will start to pick up, 0:18:42.760 --> 0:18:45.159 But as it does pick up, it's going to become 0:18:45.160 --> 0:18:49.200 more logistically complex to determine who is eligible for vaccination. 0:18:52.160 --> 0:18:53.639 You know, one of the interesting things that we've been 0:18:53.640 --> 0:18:58.760 talking about a lot here, Mercedes, is the possibility that, um, 0:18:58.880 --> 0:19:01.120 if you don't get the vac seeing, maybe your name 0:19:01.200 --> 0:19:02.679 is going to go on a list. I think Spain 0:19:02.880 --> 0:19:05.159 is doing that if you refuse it. If you do 0:19:05.240 --> 0:19:08.320 get the vaccine, maybe you get to get on a 0:19:08.359 --> 0:19:10.800 plane or go in a restaurant, you get special privileges. 0:19:10.960 --> 0:19:12.920 Are they talking about that in the US as well? 0:19:13.960 --> 0:19:16.119 You know, there have been a lot of discussions about 0:19:16.160 --> 0:19:19.400 whether or not you can compel individuals in the US 0:19:19.480 --> 0:19:23.520 to become vaccinated. Now, they are always going to be exceptions. 0:19:23.560 --> 0:19:28.679 But my understanding is that employers can require vaccination as 0:19:28.720 --> 0:19:32.360 a term of employment. Schools can do that, but they 0:19:32.359 --> 0:19:35.000 do have to allow for exceptions. But I think where 0:19:35.040 --> 0:19:39.119 this where this will become an interesting debate, but not 0:19:39.240 --> 0:19:42.800 a theoretical one, because it has such real implications, is 0:19:42.840 --> 0:19:46.520 that what if employees in a workplace refuse to vaccinate 0:19:46.880 --> 0:19:50.879 and then they become sick at work, whose responsibility is 0:19:50.920 --> 0:19:53.880 it going to be to pay for that sickness if 0:19:53.880 --> 0:19:58.080 they allow those individuals, and what if their illness puts 0:19:58.560 --> 0:20:01.600 the clients or the patrons of that business at risk. 0:20:01.680 --> 0:20:06.120 I think the simple example of school systems, will school 0:20:06.240 --> 0:20:10.480 teachers that administrators be required to vaccinate since as you 0:20:10.560 --> 0:20:14.800 know right now, Uh, these vaccines are not approved for children, 0:20:15.080 --> 0:20:17.919 yet we do know they're in the US two million 0:20:18.040 --> 0:20:21.320 children have contracted Uh great nineteen. Well, it's just a 0:20:21.359 --> 0:20:24.000 reminder that we still need more testing and that testing continues. 0:20:24.080 --> 0:20:27.199 But I do wonder, Mercedes Um, that this speaks to 0:20:28.040 --> 0:20:31.120 we supposedly had months that we were working on logistics 0:20:31.119 --> 0:20:33.879 for the distribution of a vaccine. We knew it was coming. 0:20:34.240 --> 0:20:38.000 Operation warp speed was full speed ahead. Uh, if you will, 0:20:38.040 --> 0:20:41.199 I do wonder that, uh, if things aren't going as 0:20:41.280 --> 0:20:43.040 quickly as they are right now. And I understand, you 0:20:43.080 --> 0:20:45.280 give the vaccine, you've got to wait fifteen minutes or 0:20:45.320 --> 0:20:47.439 thirty minutes to make sure that there's no reaction for 0:20:47.480 --> 0:20:50.880 an individual. But do we need to see some kind 0:20:50.920 --> 0:20:54.159 of like we're at war against this this virus, that 0:20:54.200 --> 0:20:58.280 we need to see some kind of plan program, more 0:20:58.320 --> 0:21:01.199 coordinated coming from the FED government to make sure that 0:21:01.240 --> 0:21:03.480 we can get this out much more quickly. Because my 0:21:03.560 --> 0:21:08.119 understanding is from the pharmaceutical companies that they've distributed millions 0:21:08.119 --> 0:21:11.240 of doses, and yet we haven't seen that necessarily show 0:21:11.280 --> 0:21:14.400 up in the actual vaccination numbers. Now that's a really 0:21:14.440 --> 0:21:18.040 good point, and Operational Warp Speed accomplished its goal of 0:21:18.160 --> 0:21:22.400 generating effective vaccines and record time. They talked about how 0:21:22.440 --> 0:21:25.399 to get them out to the states in the United States, 0:21:25.440 --> 0:21:28.520 but they didn't do any work on setting up the 0:21:28.560 --> 0:21:32.000 infrastructure to be able to deliver those vaccines. So it's 0:21:32.000 --> 0:21:34.959 sort of like getting almost to the finish line and 0:21:35.040 --> 0:21:39.480 stopping to wave and take credit without actually seeing it through. 0:21:39.880 --> 0:21:43.240 There are a lot of details around getting the vaccine 0:21:43.280 --> 0:21:45.960 into the arms of individuals, and right now we're in 0:21:46.000 --> 0:21:50.800 the easy phase because we're just um vaccinating healthcare providers 0:21:50.840 --> 0:21:54.399 and individuals in long term care facilities. We know where 0:21:54.400 --> 0:21:56.720 those people are. We can verify who they are and 0:21:56.760 --> 0:22:00.320